This invention relates to participation systems and methods.
Parties (e.g., companies or other entities and individuals) can desire to raise capital for various purposes such as financing new or ongoing operation or expenses, financing specific activities, and/or financing purchase of assets. The party seeking to raise capital can raise the capital in a variety of ways.
One way in which companies can raise capital is by issuing equity securities (e.g., stock). A share of stock in a company represents a claim on a proportional share of the company's value which is reflected in the price of the stock. Equity represents an ownership share of the issuer. As such, the value of the stock reflects the assets, the expected operating results, and the perceived risks of the entire entity as a whole.
Companies can also raise capital by taking on debt rather than selling ownership, for example, by borrowing money from banks and other lending institutions or by issuing bonds. A bond does not represent a partial ownership in the issuing company; the bond represents an absolute legal commitment by the company to pay the bondholder in a pre-specified manner. The price of a bond will reflect both the creditworthiness of the issuer as well as the “market risk” relevant to the issuance.
Individuals may raise capital, for instance, through a reverse mortgage on a property, a structured settlement, or sale of an interest in a life insurance policy. However, there are limited parties with whom an individual can form contracts in such examples, and the individual may not have access to sufficient alternatives or be able to select alternatives in a competitive marketplace in which they can obtain commercially attractive terms.